ICICI Securities has kept its 'Buy' rating on Power Finance Corporation with a target price of Rs 520. The company reported a 5% increase in profit, while investors closely monitor the planned merger with REC and recent dividend announcements.
ICICI Securities has maintained its 'Buy' rating on Power Finance Corporation (PFC) with a target price of Rs 520. The brokerage’s outlook remains positive, viewing the company's financial position as stable despite a competitive environment in the power financing sector. This assessment follows the company's latest quarterly performance, which met expectations.
Power Finance Corporation reported a profit after tax of approximately Rs 47.5 billion for the first quarter of the 2027 fiscal year. This marks a 5% increase compared to the same period last year. The profit growth was supported by a reversal in credit costs, which essentially means the company benefited from releasing funds that were previously set aside for potential bad loans. While headline profit grew, investors are paying attention to underlying operational trends such as loan disbursements, which have faced some pressure due to a competitive lending environment.
The strategic focus for shareholders remains the proposed merger between PFC and REC. The brokerage report outlines that the merger is targeted for implementation by April 1, 2027. Under the proposed plan, the share swap ratio is fixed at 88 shares of PFC for every 100 shares of REC. The combined entity is expected to hold a significant loan book exceeding Rs 11 lakh crore. However, the successful completion of this merger is still subject to necessary regulatory and statutory approvals, which remain a key monitorable for the market.
Alongside the merger developments, the company has announced an interim dividend of Rs 3.90 per equity share. The record date for this dividend payment is set for August 27, 2026. This provides a clear, short-term event for shareholders to track.
Despite the positive outlook from the brokerage, the company faces specific risks. The sector is currently navigating a period of intense competition for refinancing, which can exert pressure on lending margins. Additionally, the pace of fresh loan disbursements has been somewhat subdued, and the company needs to manage prepayment pressures effectively to maintain its growth trajectory. Investors may continue to monitor how these operational challenges are managed alongside the complexities of the upcoming merger process.